The Reserve Bank of India (RBI) recently published the Consumer Confidence Survey (CCS) for May 2019. This significant survey was carried out across thirteen distinct cities in India to ascertain the economic sentiment among the urban population.
Prevailing Economic Sentiment in Urban India
According to the latest data collected from the CCS, a palpable sense of depression appears to have struck urban India with respect to the economic outlook. The responses indicate a general expectation of increased expenditures on non-essential items both in the present and in the coming year, though these expectations have fallen to a record low since September 2015.
Role of Private Final Consumption Expenditure (PFCE)
From 2014-15 to 2018-19, the Private Final Consumption Expenditure (PFCE) has consistently held an average contribution of 56% towards India’s Gross Domestic Product (GDP). However, recent trends suggest a decline in discretionary spending, such as on durable consumer products, travel, or dining out. As a result, PFCE’s contribution to overall economic growth is witnessing a downward trend.
Understanding Private Final Consumption Expenditure (PFCE)
The term Private Final Consumption Expenditure (PFCE) refers to the total expenditure incurred on the final consumption of goods and services by resident households and non-profit institutions serving households.
Some Facts About the Indian Economy
| Year | PFCE’s Contribution to GDP (%) |
|---|---|
| 2014-15 | 55.7% |
| 2015-16 | 56.2% |
| 2016-17 | 54.6% |
| 2017-18 | 57.1% |
| 2018-19 | 56.5% |
The Impact of Decreased Discretionary Spending
One of the key factors leading to a dip in PFCE’s contribution to economic growth is the decrease in discretionary spending. The inclination to spend on items that are not necessities, such as consumer durables, travel, or eating out, is on a decline according to the recent CCS conducted by the RBI. This trend is likely to affect the overall growth of the economy, and could consequently influence fiscal policies and market strategies.